Legacy reserves cuts its quarterly dividend today to 0.35 down from 0.61 cents. The company originally planned to sustain the dividend as it did in 2008, however, at the end of the day they gave up and reduced the dividend.

However, it is apparent that the market expected this cut months ago and already priced the cut in when the stock traded at $10 or even $8 a share. This price reduction was probably inspired by cuts made by LINE and BBEP previously. Thus now the stock price already reflected that.

As cutting the dividend was expected, then both outcomes were possible – no cut, the price would jump, – cut of the dividend, the price would jump too.

And that’s exactly what happened. Amid the dividend cut, the stock rallied by 9.15% today as it was appreciated that this cut would improve the company’s balance sheet ahead of oil recovery.

Hopefully, this trend will continue and as oil continues recovering the stock recovers in price, recovers its dividend and our options trades keep expiring worthless for full premium profit.

When you click on the picture above you will see today’s trading with a large bullish uptrend. Even after hours the stock continued spiking up high. If this continues this way up, our trades will end up very well with very nice profits. I am even planning on selling more puts against this stock.

The put selling against this company also helps offset my loss on the stock. As you can see below, if I held a stock only, I would be losing $477.72 on my 36 shares I own. However, my put options I sold earlier are now helping me offsetting the loss. I am losing $235.72 only as of now.

But, if I add all dividends I already received from this stock in my TD trading account, my loss would only be $106.13 in lieu of $235.72!

Granted, those trades are not over yet. One positions is set to expire in June 2015 and the second spread is set to expire in September, and many things may happen in the meantime. My expectation is however that this stock will go up as oil will be recovering so I believe that these trades are no brainer.

It still can be a bumpy way up, so if you mirror my trades (via our free newsletter where we publish our trades), you need to be prepared for the bumpy road. But, in my opinion, it will be a rewarding one if you hold tight.

This is one reason, why I like selling put options against dividend (or even non-dividend) stocks since the options would allow you to collect premiums which may be considered an additional dividend.